Fortis, CH Energy takeover talks stall over benefit fund

By WILLIAM J. KEMBLE

Sunday, December 23, 2012

NEGOTIATIONS TO resolve issues state Public Service Commission staff members want addressed in a Canadian company's takeover of CH Energy Group have left both sides unwilling to change their positions on the amount of public benefit project funds that would be set aside in the deal.

Fortis, the company seeking to take over the parent company of Central Hudson Gas & Electric Corp., is willing to set aside $20 million in public benefit funds. Dutchess County officials support a PSC staff recommendation that the figure should be $85 million.

"I think we're going to reconvene early in the new year to continue with the process," Fortis Vice President Barry Perry said. "At some point, we'll have to make a decision whether we feel we can get to a settlement or not. There is a schedule set up for a litigation process, which is the sort of parallel process that we have under way as well."

Perry said his representatives have reported that negotiations to buy Central Hudson's parent company for $1.5 billion have not been easy.

"We're trying to obviously come into the state and we put forth a pretty strong case, we believe," he said. "I would say we're still a ways apart. We're not close at this point in time."

In testimony to the commission during the past two months, Fortis has called the public benefit assessment a transaction fee that has been miscalculated by state officials. Perry said the assessment remains the biggest difference between the two sides.

"It comes down to proving there is a monetary benefit to customers and the process that we're going through to determine how much that benefit should be," he said. "We're using some precedent transactions that have been approved by the commission as a tool to come to that amount and each side has different interpretations of what those precedents mean."

Perry said while both sides are "getting to know each others' positions," he isn't ready to see a benefit figure that meets somewhere between the two proposed amounts.

"I wouldn't want to say that would be the outcome at this point in time," he said.

There were four days of negotiations last week, with both sides agreeing to meet again to see whether they can close the gap. An administrative law judge will be asked to review the information if an agreement cannot reached.

"We have a week I guess to see if we can get to a settlement," Perry said. "If not, we'll go through the litigation process, which no one should be wholly alarmed at. It's the other way of getting there. It may take a little longer, but we'll leave it in the judge's hands to interpret the evidence. ... We're used to that process and if that's where we have to go, we'll definitely go there."

Dutchess County Executive Marc Molinaro said negotiations have been encouraging because state officials appear to be taking the concerns of municipalities seriously.

Molinaro said representatives for the county have found there is agreement that the benefits would be important but the "question is how big will that be and what would be included. We very much want to move energy-related projects as projects that could be funded."

Bill O'Neil, the deputy county executive in Dutchess, said state PSC staff has been receptive to comments from local government officials.

"Staff is moving toward the counties," O'Neil said. "We came into this picture and the counties have never previously been in the process. We introduced ourselves and in the beginning they said 'who are you?' ... I think we made significant progress in being recognized, accepted, and now we're hopeful going forward we'll be dealt with because we are best able to provide for the long-term benefit of the consumers."

O'Neil said the county's position is that the benefit funds should focus on energy efficiency projects that would be difficult to finance locally.

"That was stated (Wednesday) and I think we made headway with the commission," he said. "I'm not sure Fortis and Central Hudson are there yet, but hopefully they'll see that there's not only a benefit to the project but a benefit to Fortis because if they're working with us on projects, they're going to get the public benefits from consumers."